California Condoguru ENewsletter

BRIEF BRIEFING ON SOME 2008 CASES OF INTEREST

2008 was a somewhat prolific year in the courts for HOA cases. I will not go over all of them here; however, if you are a subscriber to the CALIFORNIA HOMEOWNERS ASSOCIATION LEGAL DIGEST (available as a subscription newsletter see publications - click here - you will, by the end of the month, receive the November-December edition of that newsletter explaining more about the following cases and other cases heard and decided in 2008 by the California courts. What you should take away from the following brief notes about the case findings is not that the outcome here would be the same in all cases - because each case is based on a set of facts that could be distinguished from another set of facts - but that Boards or others that act responsibly, within the authority of the documents, and with good intentions, can often withstand challenges by owners who disagree with the Board's actions.

Civil Code Section 1356 Petition Amendment Cases If a Board attempts to amend the governing documents by sending out a proper ballot, and more than 51% of the members approve the amendments, but not the supermajority required for approval, the Board can petition the local Superior Court and ask a judge to approve the amendments (Civil Code Section 1356). Twice in 2008, the appellate courts upheld petitions that were challenged by members.

MISSION SHORES ASSOCIATION v. David PHEIL, 2008 WL 4097269 (Cal.App. 4 Dist.)

Owner Pheil opposed a petition that was approved by the court, resulting in the imposition of a 30-day minimum for leases (where before the minimum had been 7 days). The court upheld the intent which was to prevent homes from becoming "hotels". Part of the challenge was based on a provision in the petition law that said no amendment should be approved by the court that impairs the security interest of mortgagees (lenders) without the vote of lenders, if required (Civil Code §1356(e)(3)). The court found no impairment occurred by this change.

FOURTH LA COSTA CONDOMINIUM OWNERS ASSOCIATION v. SEITH: In this case, the court also approved amendments that were the subject of a 1356 petition. The amendments related to assignment of parking spaces, restrictions on signage, and tenant responsibility to follow the association regulations and rules. In this case, the court also was asked to determine if the fact that lender approval was not received should hamper the imposition of the proposed amendments. In this case, in response to the claims raised, the court found (1) balloting by mail was authorized; (2) written consent from lenders was adequate; (3) association made reasonably diligent effort to permit all eligible owners to vote; (4) proposed amendments were reasonable; (5) length of extension of condominium agreement was not limited to 20 years; (6) owner had no right to post signs in common areas advertising sale or lease of her unit; and (7) reduction in percentage of votes required to amend did not unconstitutionally impair contract rights. The court recognized that the purpose of statute allowing petitions to superior court to reduce percentage of affirmative votes required to amend condominium association's declaration of covenants, conditions, and restrictions is to give a property owners' association the ability to amend its governing documents when, because of voter apathy or other reasons, important amendments cannot be approved by the super-majority (more than 51%) vote required by the normal procedures authorized by the declaration.

In this case, there was a provision in the CC&Rs that they could be amended only if "written notice of the proposed amendment is sent to all lenders and a written consent is obtained of seventy-five percent of the lenders". The lenders ballot notified them that their signature on return receipt would be deemed consent unless ballot was returned within thirty days. Very few lenders replied by returning a ballot, and the court "relaxed in form" the lenders voting requirement and allowed the amendments. The court's willingness to do this most likely came from the showing the HOA made in the case of over-the-top (more than the minimum required) attempts to get the owners and the lenders to respond to the ballot measure.

ACC Cases More Cases That Should Guide Boards and That Reflect How Diligence Pays Off

HARVEY, as Trustee, etc., Plaintiff and Appellant v. The LANDING HOMEOWNERS ASSOCIATION et al.,162 Cal.App.4th 809, 76 Cal.Rptr.3d 41. In this case an owner brought an action for trespass, breach of fiduciary duty and injunctive relief against the HOA, the board, and owners who had been given exclusive use of attic areas. In this case, owners who had been granted use of common area attic space included some board members.

The Court held that:(1) granting right to use common area in attic for storage was within board's authority; (2) board of directors acted upon reasonable investigation, in good faith, and with regard for interests of community; and (3) there was no conflict of interest in authorization to use attic.

Owners often think when board members get some benefit of some kind that there is automatically a conflict of interest. Not so. In this case, the Board acted with authority, made reasonable investigation into the situation, proceeded with good faith, and the best interest of the community (or so found the court).

"In allowing fourth-floor homeowners each to use up to 120 square feet of common area in an attic accessible only from fourth floor for storage, condominium board of directors acted within its authority under declaration of covenants, conditions, and restrictions providing that board could designate storage areas in common area, that board had exclusive right to manage, operate, and control common areas of condominium development, and that board had authority and discretion to allow an owner to use exclusively the common area provided certain conditions were met including that use be nominal and not unreasonably interfere with any other homeowner's use or enjoyment." What is important here is to note that although California law generally requires 2/3 homeowner approval for granting exclusive use of common area space, there are exceptions and the document language matters. Also, the court noted (and obviously appreciated) that the Board "acted upon reasonable investigation, in good faith and with regard for the best interests of the community association and its members in allowing fourth-floor homeowners each to use up to 120 square feet of an attic for storage, and thus the court would defer to board's authority and presumed expertise in reviewing that decision, where board conducted investigation into unapproved use of attic, met with city officials to ensure use of attic space complied with building codes, consulted insurance broker, prepared standard permission form signed by each attic user and required users to obtain liability insurance coverage, and called special election of all condominium homeowners to determine whether board should permit attic use."

As to the owner's presumptions about benefit to some of the board members, the court found that no conflict prevented the Board from taking the action it did.

Pacific Hills Homeowners Ass'n v. Prun, 160 Cal.App.4th 1557, 73 Cal.Rptr.3d 653, 08. In this case, the HOA brought an action against owners for breach of the CC&Rs, nuisance, and asked for court interpretation of the documents (declaratory) and court orders (injunctive) relief. The trial court ordered the owners to move or lower their gate and fence, on condition that association agreed to pay 2/3 of cost upon timely request. The parties both appealed. The appellate court held: (1) the action was within [the 5 year, not a 4 year] statute of limitations;(2) the claim was not barred by laches [which is waiting too long to act]; (3) the HOA [board] acted fairly, reasonably, and uniformly in enforcing restriction; but(4) conditional injunction [requiring HOA to share in costs of modification because of its delays] was proper. There is a 5 year statute of limitations to the action to enforce height and setback restriction on a members' fence and gate, even though the restriction did not appear in the recorded CC&Rs. The SOL also applies to "other form of restriction(s)." Cal.C.C.P. § 336(b); West's Ann.Cal.Civ.Co de § 784.

In this case, the HOA waited 6 months after denying approval for fence to ask members to bring it into compliance, waited 13 months before suggesting mediation, and waited almost a year before suggesting mediation again. The action was filed more than 4 years after the violation occurred. The court found that the HOA did not agree to the gate and fence, and that delays did not prejudice members, which is what would have supported the defense of laches owner presented to shoot down the association's claims of nuisance and breach of the CC&Rs. What saved the HOA is that the owners had begun building the gate before they submitted application for approval to association, so the HOA could not have prevented gate from being built even if it had been diligent.

The court outlined the criteria for determining whether a homeowners' association's enforcement of the provisions of its CC&Rs is reasonable, as required to judicially compel an act by one of its member owners, as fol lows "(1) whether the reason for withholding approval for the member's action is rationally related to the protection, preservation or proper operation of the property and the purposes of the association as set forth in its governing instruments and (2) whether the power is being exercised in a fair and nondiscriminatory manner."

The appellate court found that the trial court did not abuse its discretion by enjoining homeowners to move or shorten fence and gate to comply with homeowners' association's height and setback restriction, nor was it an abuse to require the HOA to pay 2/3 of cost of moving fence upon timely request and by providing that injunction would dissolve if association refused to do so. This court imposed condition was due to association's delay in filing action more than four years after fence was erected, after several long periods of not contacting homeowners. In other words, the HOA could sustain a defense to its claims and it got its injunction, but the delays were long enough to warrant punishing the HOA by requiring it to pay a 2/3 share in the costs of reconstruction.

Child Drowning Case. Child drowning cases are always distressing, and one often believes that if it happens at an HOA pool, the HOA will be sued for negligence, even if it is the parents that are negligent. This case may be of some help. It involved one family member suing another (who owned the home with the pool) for failure to supervise the child. PADILLA v. Lopez/RODAS, 160 Cal.App.4th 742, 73 Cal.Rptr.3d 114.

A sibling/owner of home who invited mother and two-year-old child to their home was sued when the child drowned. The mother (Padilla) had gone in the house. During this time at the pool the sister was not home. Her partner/owner (Rodas) was at the home, and for part of the time present at the pool, but he had left to take a phone call. The mother blamed Rodas for failure to supervise the child.

The court found that Rodas had no duty to supervise child while child "was under mother's supervision." It was not reasonably foreseeable that mother would leave child outside unattended, and even if Rodas had accepted joint responsibility of supervising child on the day of the accident, he abandoned that undertaking when he left the front yard area to talk on telephone, leaving the mother watching the child. Civ.Code § 1714(a). HOAs may be a common target, but they may not always be guilty of negligence, and may not always be subject to a large judgment, just because a child drowned at the pool. I think this is a case where signs declaring that there is no supervision at a pool or playground may be helpful, so as to defend any claim of a parent whose child is injured to who says they assumed there would or should be some HOA supervision.

These cases are just a sampling that indicate if a Board acts according to what the documents say, and logically, reasonably, and with good intentions the courts may allow extra "give" to find allow them to defend the HOA effectively or prevail in seeking court orders or on a court petition. However, if the Board lags in its efforts, even if the support of the technical law is present, there may be a price attached to justice.

Seasons Greetings! My best to all of you over the holidays and in 2009. I hope that you can pass off the information to friends about this helpful newsletter, and my website. I will be adding many new Primers and helpful tools in the coming months.

And may peace be with you!!!

Beth